Reviewer for Fundamentals of Accountancy, Business and Management (FABM) under the ABM strand.
The Accounting Equation
Every transaction keeps this equation balanced:
| Element | Meaning | Examples |
|---|---|---|
| Assets | What the business owns | Cash, equipment, receivables |
| Liabilities | What it owes | Loans, payables |
| Equity | Owner’s claim | Capital, drawings |
If assets increase, either liabilities or equity must increase by the same amount — the equation always balances.
The Five Major Accounts
| Account | Normal balance |
|---|---|
| Assets | Debit |
| Liabilities | Credit |
| Equity | Credit |
| Income | Credit |
| Expenses | Debit |
Debit ≠ decrease. For assets/expenses a DEBIT increases them; for liabilities/equity/income a CREDIT increases them.
Financial Statements & the Cycle
The cycle: journalize → post → trial balance → adjust → financial statements → close. The main statements are the Income Statement (profit/loss), Balance Sheet (financial position), and Cash Flow Statement.
Worked Example
An owner invests ₱50,000 cash. How does the equation change?
Both sides rise by ₱50,000 — the equation stays balanced.
Before your exam, make sure you can confidently explain and apply each of the following:
- The Accounting Equation
- The Five Major Accounts
- Financial Statements & the Cycle
- Worked Example
Re-read any section above where you hesitate.